Facebook Inc.’s $19-billion (U.S.) acquisition of messaging company WhatsApp is the strongest signal yet that the risks are getting larger in the technology industry’s latest gold rush.

The purchase, announced on Wednesday, is the most eye-popping indicator that the demand for mobile-focused tech startups might be reaching a fever pitch. But there are others. A week before the WhatsApp deal, Japanese online retailer Rakuten Inc. announced it will buy messaging service Viber for $900-million. With some 300 million users, Viber’s price-per-user is well below the $42 Facebook is paying for each of WhatsApp’s users.

But both transactions are lofty, given that there’s no sense that either of the acquisition targets are making very much money at all. WhatsApp, an instant messaging application that allows users to communicate with each other across iPhone, BlackBerry, Android and other devices, has shunned advertising and games. It gives the app away for free for a year and charges $1 a year after that.

It is not clear what proportion of WhatsApp users pays anything at all, and how many simply re-sign every year with different personal information to avoid paying.

The rush of deals for mobile messaging startups has, in just a few days, forced the market to seriously reassess the valuation of such services, as it becomes clear that some of the biggest technology companies on

the planet are willing to write multibillion-dollar cheques for them.

In some cases, those takeovers are being financed primarily with richly-valued shares.

Facebook, whose shares trade at 55 times this year’s estimated earnings, is paying $15-billion in stock to WhatsApp’s backers and employees.

Still, there remains a disconnect between the sort of valuation Facebook’s purchase suggests and how far the market is willing to go.

Shares of BlackBerry Ltd. popped in in U.S. after-hours trading on Wednesday after news of the WhatsApp deal and rose 4 per cent in Toronto on Thursday, closing at $10.41. TD Securities analyst Scott Penner doubled his estimate of the value of BlackBerry Messenger, the company’s popular communication software. At a similar $42-per-user valuation, BBM would be worth roughly $3.4-billion, or two-thirds of the company’s entire current market cap. But Mr. Penner was only willing to value the service at $10 a user, or $800-million.

“This is up from $5 per user,” he said. “Understanding that the valuation is not really comparable, engagement metrics of BBM stack up well with WhatsApp and this deal does highlight the value of messaging platforms.”

There are at least a couple of reasons why Facebook would be willing to pay a hefty premium for a startup like WhatsApp. The first is geography. WhatsApp is relatively unheralded in the U.S., where many consumers don’t care about saving money on text messaging because their monthly wireless plans often come with an unlimited number of texts.

But overseas, in key markets such as Europe and Latin America, WhatsApp is a phenomenon. That sort of geographic layout suits Facebook well, because the social network may well have reached the limit of its user growth in North America, but still struggles to win over consumers in several other parts of the world. The company had 147-million daily active users in the fourth quarter, up just 3 million from the previous quarter.

But just as there are synergies between the two companies, there are also glaring fissures. The most obvious is advertising. Much of Facebook’s lofty market valuation comes from its advertising potential – specifically, its ability to use its huge database of personal information to help marketers better target users. About 90 per cent of its revenue comes from advertising.

It’s hard to see WhatsApp’s business approach, which favours user fees over advertising, gelling with a social network that states prominently on its home page that it is and always will be a free service.

WhatsApp chief executive Jan Koum, who will now sit on Facebook’s board of directors, has made it clear that user base growth, not profit, is his priority. But even if WhatsApp does focus on generating revenue, its current monetization strategy would take years to justify its price tag.

On an industry level, WhatsApp also faces serious risks. The primary appeal of messaging services is cost. Whereas text messages is subject to charge by traditional telecom companies, messages sent through services such as WhatsApp make almost no dent at all in the average wireless data plan.

As messaging apps evolve, that calculus may change. Once users start to use WhatsApp and similar services to send photos and videos, it becomes more difficult to ignore the portion of the data plan consumed.

Still, even as that evolution continues, WhatsApp and its competitors remain one of the cheapest ways to communicate on smartphones. The bigger problem for WhatsApp – and, now, Facebook – is the proliferation of those competing services. Services such as Viber and Line (a free calling and messaging platform that’s hugely popular in Japan) already boast hundreds of millions of users – as does Canadian startup Kik, which recently passed the 100-million user mark, as did BlackBerry Messenger.

And in an industry where technological barriers to entry are decidedly low, there’s no telling what the next blockbuster app might be.

“Yeah, [WhatsApp’s users are] paying a buck every year, but what happens if they move to the next app?” said Frost & Sullivan telecom analyst Ronald Gruia. “There could be someone else who comes up with another WhatsApp, but maybe that app allows you to take selfies, and maybe that becomes the preferred service.

“Maybe the valuation makes sense assuming things stay the same, but that may not be the case.”

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